Investment analysis

The continued violence in the Middle East and concerns about the financial health of some global heavyweights continued to unnerve investors and drove down stock indices last week. The representative FTSE World index ended the five days 1.4 per cent lower.

In the US, General Electric kicked off the earnings&#39 season with a disappointing report. IBM&#39s profit warning weighed heavy on the technology sector and inquiries into the accounting practices of IBM, Xerox and Merrill Lynch hit sentiment.

In Europe, economic news continued to point towards a recovery, with German unemployment falling for the first time since December 2000. But investors focused on corporate concerns and, after IBM&#39s announcement, Germany&#39s Software AG followed suit and cut revenue forecasts.

Concerns in the German banking sector continued on debt exposure fears after the collapse of media group Kirch. Against this backdrop, it was no surprise to see the FTSE Eurotop 300, Germany&#39s Dax and France&#39s CAC40 off 1.4 per cent, 1.3 per cent and 1 per cent respectively.

In the UK, the FTSE 100 ended the week down by 1.4 per cent below the critical 5,200 support level. The blue-chip index was dragged down partly by Vodafone, which over the week lost nearly 16 per cent on revenue growth concerns, and mm02, which shed 21.7 per cent. Small companies fared better, with the Hoare Govett Sm Co and FTSE Fledgling indices both gaining 0.4 per cent.

In Japan, the markets were hit by the release of the government&#39s report on bank bad debt. The fall led by the banks and broking houses left the Nikkei 225 below the 11,000 level for the first time since March 1.

In South-east Asia, Hong Kong&#39s Hang Seng index slipped back by 1.1 per cent and in Indonesia, the composite index continued its strong performance, closing at a two-year high following strong foreign and local institutional demand and debt rescheduling talks.

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